Event: on March 29, 2016, Qianjiang Water Conservancy released its annual report. According to the annual report, the company's total operating income reached 800 million yuan in 2016, up 1.4% from the same period last year, and the net profit returned to its mother was 60 million yuan, up 43% from the same period last year. In 2016, the company's total assets reached 5.5 billion yuan, an increase of 4 percent over the same period last year; net assets belonging to shareholders of listed companies reached 1.7 billion yuan, down 3 percent from the same period last year; and the weighted average ROE was 3.37 percent, an increase of 0.81 percent over 2015. The main reason why the growth rate of the company's return net profit is much higher than the growth rate of operating income is that the investment income from taking a stake in Paradise Silicon Valley is 90 million yuan.

Participation in venture capital earns a lot of money. The net profit of Paradise Silicon Valley in 2016 was 320 million yuan, an increase of 159% over the same period last year. Shareholders of Paradise Silicon Valley include the new third board company Silicon Valley Paradise, A-share listed companies Qianjiang Water Conservancy and Zhejiang Dongfang. Listed shareholders provide rich financing channels for Paradise Silicon Valley. Qianjiang Water Conservancy participated in the capital increase and share expansion plan of Paradise Silicon Valley in 2015, contributing 285 million yuan, and the company holds 27.9% shares in Paradise Silicon Valley. The investment income is 90 million yuan, accounting for 71% of the operating profit. By the end of September 2016, Paradise Silicon Valley had nearly 158funds under management, more than 242investment and asset management projects, and a total contribution of 21.8 billion yuan.

IPO accelerates the opening of venture capital exit channels. The performance of the venture capital market in 2016 is still active. According to the data of Qingke Research Center, there were 3683 investments in the domestic venture capital market in 2016, an increase of 7% over the same period last year. The 3419 transactions disclosed involved a total of 131.3 billion yuan, 1.9 billion yuan more than in 2015. The new third board listing is the main way to exit venture capital, but with the acceleration of IPO, the number of projects exited through IPO has increased significantly. IPO withdrew a total of 277 deals in 2016. It is the second largest exit mode for venture capital companies. It is expected that the release speed of IPO will continue to improve in the future, the exit channel of venture capital companies will be smoother, and the income of venture capital will be significantly improved.

Water management is stable and loss-making real estate is disposed of. In 2016, the company's water supply and treatment business income was 760 million yuan, an increase of 3% over the same period last year. For the whole year, the company sold 320 million tons of water, 101% of the annual plan, an increase of 6.5% over the same period last year, and sewage treatment of 58.2 million tons, 109% of the annual plan, an increase of 7% over the same period last year. The company will raise an additional 745 million yuan, of which 609 million will be invested in water construction projects and 136 million yuan to supplement working capital. The investment of raising funds has improved the operating capacity of the water business, and the scale of water supply has been expanding. In the future, the company will improve the efficiency of the company's resource utilization by cooperating with industrial funds in its main business. The company plans to sell 320 million tons of water and 87.48 million tons of sewage in 2017. the income of the water supply and treatment industry is about 955 million yuan. The real estate business incurred a loss of 1.84 million yuan in 2016. the company actively dealt with the real estate business and made substantial progress. The company disposed of the 100% equity of Jintian Real Estate, bonds and Jintian property held by Water Conservancy Real Estate with 1.034 billion yuan, reducing the drag of real estate business on the company's performance.

Investment advice: buy-An investment rating, 6-month target price 14.32 yuan. We expect the company's EPS from 2017 to 2019 to be 0.25,0.28,0.32 yuan respectively.

Risk tips: macroeconomic downside risks, policy risks, operational risks